EH-NET BOOK REVIEW

Published by H-Business@cs.muohio.edu (March, 1998) Christopher Armstrong. Blue Skies and Boiler Rooms: Buying and Selling Securities in Canada 1870-1940. Toronto: University of Toronto Press, 1997. x + 390 pp. Photographs, appendix, and index. $39.95 (cloth), ISBN 0-8020-4184-1.

Reviewed for H-Business by Prof Ranald C. Michie , University of Durham

Usually with an academic book, the main title is designed to attract the attention of potential readers–even purchasers–while the subtitle is a more accurate description of the content. In this case, the reverse is true. Instead of being a history of the Canadian Securities market from 1870 to 1940, which I was expecting, this book concentrates, almost exclusively, upon the high pressure and/or fraudulent techniques employed to sell speculative mining securities to the investing public, and the measures employed by Canadian federal and provincial governments to stop them. Certainly there is much material on the various Canadian Stock Exchanges and their members, but this is a back drop to their participation in a process whereby large numbers of credulous investors were sold vast numbers of shares in numerous worthless mines year after year by manipulative promoters. Consequently, in reviewing this book one must be always conscious of what it is about, not what one might expect it to be about. However, judging from the introduction, there is the presumption that this book did begin as a history of the securities market in Canada, for it is stated that it “is one of two volumes dealing with the evolution of public securities markets in Canada” (p. 3). Volume II presumably takes the account from 1940 to the present. Quite quickly, the reader is informed that there is little of interest in the buying and selling securities, and thus one can hardly inflict upon the public an account of the evolution of the Canadian Securities market. Instead, it is considered much more rewarding to focus on “crooks and shysters” (p. 8) as that will result in a far more interesting book. Though I disagree with the author’s view that there is little to say about the development of securities markets–even that of Canada–he is probably right in his assumption that a book that concentrates upon fraud, corruption, and human greed has more appeal than one about the institutional arrangements of stock exchanges.

The first and third chapters do deal with the beginnings of Canada’s securities markets, but no distinction is made between the creation of a formal exchange and the existence of an open market, and thus there is no discussion of why the latter leads to former. If there had been such a discussion, the author might have been more aware of the extent and limitations of a stock exchange’s jurisdiction. A Stock Exchange can enforce discipline among its own members, ensuring that deals take place in an environment of trust, but it cannot be expected to police all aspects of the securities business, including the initial sale of securities, or to provide investor protection. The more an exchange is drawn into areas such as these the more likely it is to face competition from over-the-counter (OTC) markets devoid of such rules and regulations. At the same time there is no attempt to explore the relationship between the Canadian Stock Exchanges and those in New York and London, which had such an important influence on the Canadian securities market before 1914 and subsequently.

With Chapters Two and Four, the author settles into the theme of the book–the promotion of Canadian mining companies and the methods used to persuade investors to buy shares in them. Initially, the principle of “caveat emptor” applied, but even before the First World War various provincial legislatures, beginning with the Prairie Provinces, began to restrict such activities. This speculation in mining shares died away with the outbreak of the First World War. The exchanges were even closed for a number of months, and when they did re-open they were subject to government control while their business switched to trading Canadian government debt. During the period 1915-19 the Canadian government raised $2.1 billion domestically, rather than in London as had been the pre-war practice. In turn, trading in bonds on the Montreal and Toronto stock exchanges rose from $6.1 m in 1913 to $132 .1 m in 1919. Clearly, the Canadian securities market was transformed as a result of the First World War. Unfortunately, the book then ignores the post-war bond market, though, from the statistical appendix, it is clear that it had become an established feature. Instead, the chapters dealing with the 1920s (Six and Seven) concentrate on the miss-selling of mining securities, the lack of stock exchange regulation, and the role played by government. This then leads into the Wall Street crash of October 1929, which was felt heavily in Canada, where investors blamed the exchanges and their members for their losses. Again the focus is almost entirely on the mining market and its practices with little on industrial or utility stocks and nothing on government bonds.

What emerges as interesting from these chapters (Eight and Nine) is the author’s conclusion that Britain’s departure from the Gold Standard in September 1931 had no more damaging impact on the Canadian securities market than the Wall Street Crash of October 1929. The former undermined the confidence of banks, and this their lending policies, whereas the latter was an inevitable market correction. This to me is worthy of wider discussion.

As a result of the crises of 1929 and 1931, Canadian governments became very concerned with practices in the securities markets, which were seen as bearing a heavy responsibility for what had taken place. A Security Frauds Prevention Act was passed in 1930, but its effectiveness was hampered by provincial/federal rivalry. Thus, instead of following the United States in creating a Securities and Exchange Commission, in Canada the provincial authorities were left as sovereign in regulating securities. The experience of Ontario in particular is extensively chronicled as they attempted to curb fraudulent excesses in mining securities, especially when the market boomed in 1933/4, on the back of the revaluation of gold by the United States (Chapters Eleven through Thirteen). As part of this process, increasing pressure was placed on the stock exchanges to tighten up their own regulations. What thus emerged was growing co-operation in the 1930s both between the major stock exchanges in Montreal and Toronto and the various provincial authorities. What consequences this had for the securities market, both generally and individually, is never really explored. It would have been interesting to know if exchanges flourished best under a lax regime or in a more regulated environment providing greater investor protection.

The final chapter (Chapter Fourteen) sketches in the years immediately before the outbreak of the Second World War. With war being so widely predicted, investors adopted a more cautious attitude and so the level of stock activity was low. The book then draws to a close with a short conclusion and a valuable statistical appendix giving turnover on the Montreal and Toronto Stock Exchanges between 1901 and 1936. From this data, it appears that Toronto’s participation in the bond market virtually disappears after 1923, leaving the field to Montreal. Turnover in bonds in Montreal then collapses after 1931. Why all this took place is never explained in the book, which is a pity, for in it may lie part of the explanation of how Toronto came to dislodge Montreal as the financial center of Canada.

Overall this is a long, carefully researched book that weaves together financial, political, legal and social history to present an account of the problems encountered in protecting the human race–even Canadians–from their own stupidity. However, to consider it a history of the Canadian securities market would be a grave mistake. The securities of new mining companies, in their exploration phase, were always regarded as speculative counters and so attracted the gambling instincts of investors. However, these were not the only securities held by Canadian investors and traded on organized markets there. Throughout the period there was a regular business in the stocks of Canadian banks, insurance companies, railways, utilities and industrials as well as a significant bond market from 1916 onwards. The author’s own appendix makes this clear. This trading reflected the varied influences of the domestic and international capital and money markets, as well as changing investor sentiment, as with events like the First World War, the Wall Street Crash, and Britain’s departure from the Gold Standard in 1931. For me, this would have made a much more interesting book than the one delivered here, for I did tire of the endless repetition of mining scams. Finally, I do wonder why the author ignored my 1988 article in Business History Review entitled “The Canadian Securities market, 1850 to 1914.” Judging from his comments in the introduction to this book, he probably found it too boring!! I am sure many would agree with him!!

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Published by EH.NET (March 1998)

Lawrence H. Officer, Between the Dollar-Sterling Gold Points: Exchange Rates, Parity, and Market Behavior. Cambridge: Cambridge University Press, 1996. xxi, 342 pp. $59.95 (cloth), ISBN: 0521365384.

Reviewed for EH.NET by Alan M. Taylor, Department of Economics, Northwestern University.

Lawrence Officer has been making influential contributions to international and monetary economics and history for many years. He is perhaps best known to economic historians for his work on exchange market arbitrage under gold (or read, metallic) standards. In a series of tightly-argued journal articles he challenged the widely accepted revisionist scholarship that had sought to depict the gold standard as inefficient and unstable, building his case on a monumental collection of primary data, careful statistical inference, and elegant theory. The present book extends and buttresses these arguments, sustaining a well-documented analysis of this monetary regime for over three hundred pages. The work focuses on the U.K.-U.S. foreign exchange market and leaves us with probably the most comprehensive and informative single treatise on this centuries-old institution. The work will be invaluable to macroeconomic historians interested in Britain and the U.S. in the late nineteenth and early twentieth centuries, and it should provide a good model for others wishing to understand similar monetary regimes at other times and places.

The introduction itself lays out the plan of the book. Officer makes his key point here that the subject is not just about whether gold points were violated, but that a complete analysis must examine the position of the exchange rate as an object of study, at all points inside and outside the gold-point boundaries. To this end, the author makes the case for getting the best possible data, at the highest frequency, for the longest time span. Finally, the key questions of market integration and efficiency (of the market and of the regime) are to be considered.

Part One of the book lays down the key historical and institutional features of the landscape from the beginning of the dollar-sterling gold standard in 1791 (when the U.S. went to a formal metallic standard) to its demise in 1931 (when Britain suspended convertibility). The laws and mechanics of coinage, minting, convertibility of paper to metal, dealings in the market and at banks, and so forth are all carefully described. The text and tables note significant legislative acts forcing regime changes for both countries in this entire time span, including changes in the metal of the standard for the U.S., and changes in parities for both countries (i.e., the metal content of the unit of account). Periods of convertibility and inconvertibility are shown.

Part Two comprises an exhaustively constructed data set to permit the study of this institution. First, the relatively simple job of computing implied parities is achieved using the information on metallic content in Part One, plus data on market prices of gold and silver (in U.S. bimetallic episodes). We find that from 1837, until 1931, after its initial wavering, the dollar-pound parity rate settled at the famous 4.8665635 point for well nigh a century. The market exchange rate was not so stable, and a long chapter discusses the sources and their quality, usefulness, and representativeness. Officer is eventually able to present data on the dollar-pound exchange rate for the entire period at quarterly frequency. In addition, monthly series are constructed for some periods: 1890-1906; 1925-1931; and, for a Bretton-Woods era comparison, 1950-66. Pre-1879 great care is taken (following Perkins, not Davis and Hughes) to adjust the bills of exchange to a uniform zero (“sight”) maturity. This ensures temporal consistency with the later cable rates; it also reflects the ultimate dominance of the sight bill as an instrument in the 1879-1914 heyday of the gold standard. An implicit sight rate is derived from the price of non-demand bills and the British interest rate. Care is also taken to find a mid-point of the buy-sell rates, using information on brokers’ commissions; and further care to correct the exchange rate for devaluations of paper during paper standard periods. This level of care exceeds previous studies, and survives testing for the consistency and homogeneity of the series. This is probably the best quality data for the dollar-sterling exchange rate we now have for the entire period; it will be an essential series for future scholars. Some interesting patterns appear just from a quick look at this series (Figure 7.1, p. 102): the volatility of the exchange rate declined dramatically in the early nineteenth century; the standard deviation in 1791-1820 was about 4-6%, but had fallen to less than 0.5% after 1871, and less than 0.2% in 1901-14.

Part Three makes the next logical step: comparing the above exchange rate series with the level of known arbitrage costs; i.e., the question is whether the exchange rate remained within the gold points. This is a point of departure for another exhaustive data-building effort. To construct gold points requires information on costs of freight, insurance, brassage, knowledge of any gold devices used by the monetary authorities, and interest costs due to the time delay of shipment across the Atlantic Ocean. All of these are put together with the same thoroughness as the exchange rate data. The care taken places these estimates on a far firmer footing than earlier estimates which had typically cut corners (cf. Clark, who had assumed ad hoc constant transaction costs). And the method is clearly far superior to any of the simpler techniques offered in other sources: taking a consensus estimate of brokers; using the terribly flawed gold flow data in a revealed preference method; using a pure max-and-min spread (violations impossible!); or using piecemeal aggregate arbitrage cost data from temporally disjoint sources. Essentially Officer proceeds with a laborious first-principles approach: each and every arbitrage cost component is individually estimated, then summed up, at each point in time. This consumes 62 pages; it is hard to imagine any improvement on these series for gold import and export points in this market, and this is the model for similar work on any other market.

The data are valuable and inform two integration tests in Part IV. The decline of gold point spreads mirrors that of the decline of exchange rate volatility, as expected. After 1880, this spread was at an all-time low level (even looking forward to 1925-1931 and Bretton Woods) of just above 1.0% for gold arbitrage. (Compare with around 5% in 1780, falling to about 2% in the 1840s). Officer sees this as improved “external” integration (external to the gold points) over time. Officer then studies whether even within the band, the exchange rate can reveal improved “internal” integration over time. Econometrically this section is less fully developed. For example, the relevant time series properties of the exchange rate series are not fully spelled out, making for some problems of inference. It is not clear whether we expect, say, a random walk between the gold points. (And what about beyond?) In a complicated nonlinear model such as this, the unconditional (raw) distribution of the exchange rate can have peculiar shapes. Officer, however, considers that a uniform distribution is “natural” (p. 189) in this zone. For the criterion of “internal integration” as Officer terms it, the focus is on whether “on average” the deviation of the exchange rate from parity is less than half the gold point spread, looking at absolute deviations. Again, by this measure, integration rapidly increases prior to the 1870s, then holds steady. A big jump is seen in the 1820s. Econometrics aside, this chapter places greater emphasis on explaining long-run tightening in the exchange rate distribution, and, especially within the band. As an explanation, Officer considers the role of the Second Bank of the United States critical in reducing dispersion in the 1820s. This trend was assisted by private agents such as the House of Brown, and, later in the nineteenth century, the New York private banks.

Part V conducts various tests for violations of market efficiency. The first test looks at gold-point violations: they are few– only four months during 1890-1906, and none in 1925-1931, for example. Far fewer than in previous studies, we should note. Thus Officer’s findings are very favorable to an efficient gold standard. Earlier work is faulted for using the wrong data (e.g., cable rates) or poor measures of arbitrage costs (bad gold point estimates). Correspondingly, Officer tests for failures of uncovered interest arbitrage (following Morgenstern), covered interest arbitrage and forward speculation for the 1925-31 period. Here there are substantial failings, with unexploited profit opportunities. These are seen as following from episodic losses of confidence in the regime. It would be interesting to see similar work on the classical gold standard regime pre-1914. However, in Part VI some comparisons are drawn and, under auxiliary assumptions about the exchange rate distribution (once more) it is shown that the interwar standard was not markedly worse than its prewar cousin. Part VII concludes.

Overall, this book offers an exhaustingly comprehensive analysis of the dollar-sterling market from the 1790s to the early post-WWII period. The data work cannot be faulted, and pushes our knowledge to a much higher plane than ever before. The empirical analysis confirms our priors concerning the convergence of this market on a high level of integration by 1880. The work leaves open some interesting doors for more sophisticated econometric analysis that could engage future scholars, but in many other respects this is the final word.

(Lawrence H. Officer is Professor of Economics at the University of Illinois, Chicago.)

Alan M. Taylor is an Assistant Professor of Economics at Northwestern University, a Faculty Research Fellow of the National Bureau of Economic Research, and a 1997-98 National Fellow at the Hoover Institution, Stanford University. His current research is in two main areas: the evolution of global capital markets, and the economic history of Argentina. He serves as co-editor of the EH.Net discussion list EH.Res.

David F. Selvin, A Terrible Anger: The 1934 Waterfront and General Strikes in San Francisco. Detroit: Wayne State University Press, 1996. 272 pp. $26.95 (paper), ISBN: 0814326102.

Reviewed for EH Net by Lawrence W. Boyd, Center for Labor Education and Research, University of Hawaii.

A Terrible Anger is a narrative history of one of three massive strikes which occurred in 1934 which led to independent trade unions, organized on an industrial basis, becoming fully legal organizations in the United States. The other strikes, the Minneapolis Teamster’s strike and the Toledo Autolite strike shared similar characteristics. In each case militant trade union members, led by radicals, launched strikes for union recognition against intransigent employers who were members of bitterly antiunion employers’ organizations and who were in turn supported by political allies, police forces, and ultimately national guard troops. This is not an unusual story in American history, what was different was the unions involved emerged as clear winners in these often bloody confrontations. The end result was a massive restructuring of the United States’ labor market which has only recently begun to be re-restructured. Thus this book comes at a time when it might be useful to revisit the origins of legal labor unions in the United States.

What is useful about A Terrible Anger is that it retells a somewhat familiar story from a somewhat different perspective. Previous histories of the San Francisco strikes have focused on the leadership of the strikes and the role of communists or socialists in the strikes. Thus, this story can also be found in Labor’s Untold Story by Richard Boyer and Herbert Morais (Pittsburgh, 1955, 1980) or in Harry Bridges: The Rise and Fall of Radical Labor in the United States by Charles P. Larrowe (Chicago, 1977). Selvin seeks to “record the impulses that led to organization and conflict, to see those developments in relations to their roots in the labor movement, and to review whole the tactics and strategies, the policies and programs that undergirded the real and enduring significance of the strikes” (p. 10).

What evolved in San Francisco was a series of conditions in which longshoremen and sailors had no voice in their job conditions. The work by its very nature was transitory and “casual.” When a ship was loaded, or unloaded, the work was done and the employees were let go and then rehired when another ship docked. Although casual laborers, they were paid more than those with steady jobs. The way work was distributed, however, became a major grievance.

Some workers worked extremely long hours for short intense periods while others got very little work. Larger shipping companies with steady operations offered some employees “almost steady” labor in what were called “star gangs.” Harry Bridges, who eventually became the central leader of the strike and the International Longshoremen’s and Warehousemen’s Union (ILWU) was a member of a star gang. These gangs got most of the work, “the best jobs, the best hatches, and the longest shifts.” Fear of losing their jobs kept them quiet about work conditions.

As one longshoremen recalled, he left San Francisco at 7:00 a.m., worked all day, and returned home at 3:30 a.m. with orders to report to Alameda again at seven the next morning. As he said “So I never showed up. It was just too much . . . you work up a terrible anger against the employers.” (p.39) The people who determined which employees would work were called walking or gang bosses. Given the surplus of employees relative to jobs it was almost inevitable that they could on occasion demand kickbacks or commissions for hiring individuals. Naturally, these conditions led to the central demand of the strikes; union hiring halls where work was awarded based on seniority. This was also the major sticking point in the negotiations and was ultimately the central issue which needed to be resolved during the general strike.

A central part of this story is the violence which occurred during the strike. Several workers were killed during the strike. When two longshoremen were killed and a third wounded in what could be described as a police riot, a mass funeral set the stage for the San Francisco general strike. Basically the city was shut down for four days as a result of this strike. Unions voted to walk out in sympathy with the longshoremen and they were joined by large numbers of workers not affiliated with any unions.. This elevated what had been a serious, but local strike, to national and international attention.

In tracing the roots of the violence which erupted in the course of the strike Sevlin asserts the following, “Strike violence is almost invariably the product of a clash between two, sharply conflicting powerfully asserted rights.” (p. 92) This strike pitted the employers’ right to “unfettered use of his property” against the strikers’ assertion of “a proprietary interest” in their jobs. They did not quit their jobs but withheld their labor in order to “concentrate attention on their grievances and to negotiate some amelioration.” (pp. 92-93) This is one of the more interesting points raised by this history; that underlying these massive labor struggles were two conflicting property rights regimes.

Selvin is the only historian of this period whom I have been able to find who makes this assertion. (Others approach this as an issue of management’s right to direct the workforce following union recognition). Selvin’s point is a logical one in that the legal doctrine underlying most employment law in the United States is “employment at will.” Employers have the right to hire and fire without explaining why they make their decisions. One exception to this doctrine is workers covered under union contracts. Under these contracts employers must demonstrate “just cause” for terminating an employee. (Another exception, of course, is tenured faculty). Unfortunately this statement is not footnoted and is simply asserted. Was this the view of the strikers? Or are there other sources for this statement?

A second question is why these strikers, and the others during this year, were largely successful while historically most, if not all strikes which reached this level had previously failed. Sevlin cites two interesting points. One, as might be expected, is that the Roosevelt administration was unwilling to intervene on the side of the employers to the same extent previous administrations had. As Sevlin points out this does not appear to have been a foregone conclusion.

Roosevelt was on vacation during the general strike and the “acting president,” Secretary of State Cordell Hull, along with Attorney General Homer S. Cummings thought the National Guard and the U. S. Army should have be used to put down the strike. The Secretary of Labor, Frances Perkins, told them that she felt it was, “unwise to begin the Roosevelt administration by shooting it out with working people .” (p. 179). She also suggested that the President be consulted. Roosevelt, fishing in the Pacific, suggested that an offer to arbitrate be made in his name- an offer which was eventually never made. In any case what can be said is that the federal government did not effectively intervene on the side of employers.

Second, Sevlin points to the tactics employed by the leaders of the general strike. The strikers involved never resorted to out and out violent resistance during the strike. They met attempts to move strikebreakers or cargo with mass demonstrations and stones, but they did not riot. Their cause, especially in the aftermath of the shootings and the funeral for the dead strikers, was taken up by other unions and employees in a general strike. The general strike itself was a protest against the intransigence of the employers and the violence directed against the strikers. It was of limited duration and had the clear and limited aim of bringing the waterfront employers to accept arbitration of unresolved issues such as the union hiring hall. Unlike European general strikes, launched in efforts to achieve political power, this general strike was a mass protest aimed at changing the violent direction of the waterfront strikes. In this it was brilliantly successful.

A word should be said about the style of the book. Those who like their narrative histories to have a beginning, a middle and an end will be disappointed by this book. Sevlin’s first chapter begins with the funeral of the strikers and then moves on to beginning, middle and end. I found this to be somewhat irritating. A second problem, at least for those of us used to reading scholarly works, is the purple prose he at times uses. As an example of this in describing the funeral of the striking workers he writes, “Above the clamor of that strike-turbulent summer of 1934, the silence was a wrenching cry of pain and anger.”(p. 11) I found some of the prose and the structure of the book to be difficult to wade through in order to get to the relevant story.

Perhaps the primary value of this book is that it gives one an insight into the turbulence of the period and that this turbulence was not simply the result of socialist and communist leadership. Rather it reflected a mass radicalization of large numbers of people who came to believe in the necessity of workplace reforms that gave them a greater voice in their employment. Further, they believed that these reforms could ameliorate the harsh conditions of the Great Depression and extend democracy into another sphere of American life.

As to the overall value of this book, I quite naturally found myself referring back to Colin Gordon’s, New Deals (New York, 1994), and found that A Terrible Anger gave me a deeper understanding of many of the points Gordon makes. Examples of these include the administration of Section 7A) of the National Recovery Act (NRA) Codes; the role of NRA director, General Forest Johnson; the chaos within the Roosevelt administration during the National Recovery Act period; and the increasingly narrow options management faced concerning labor relations during this period.

(David F. Selvin was the editor of Northern California Labor and author of A Place in the Sun: History of California Labor, The Other San Francisco, and The Thundering Voice of John L. Lewis.)

Lawrence W. Boyd Center for Labor Education and Research University of Hawaii

Lawrence W. Boyd is the author of “The End of Hawaii’s Plantations: Back to the Future?” in the Annals of the American Academy of Political and Social Science, March 1996.

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H-NET BOOK REVIEW Published by H-Pol@h-net.msu.edu (February, 1998)

Kenneth Finegold and Theda Skocpol. State and Party in America’s New Deal. Madison: University of Wisconsin Press, 1995. xiv + 342 pp.=20 Tables, figures, notes, and index. $54.00 (cloth), ISBN 0-299-14760-6;=20 $19.95 (paper), ISBN 0-299-14764-9.

Reviewed for H-Pol by Garry Young , University of Missouri-Columbia

State and Party in America’s New Deal, an engrossing book by Kenneth Finegold and Theda Skocpol, asks and answers a deceptively difficult question: Why was the Agricultural Adjustment Administration (AAA) a relative success while the National Recovery Administration (NRA) failed miserably? In the process of answering this question the authors produce a classic comparative policy study that should be of interest to scholars of the New Deal, industrial policy, and agricultural policy, as well as scholars of U.S. political development, political institutions, and political parties.

The basic details are familiar to most. The National Industrial Recovery Act (NIRA) and the Agricultural Adjustment Act (AAA) passed during the “Hundred Days” of Roosevelt’s first year in office. These acts created the National Recovery Administration (NRA) and the Agriculture Adjustment Administration (AAA), respectively. Both agencies were given the general task of reducing output and, thus, increasing prices. Declared unconstitutional by the Supreme Court in 1935, only remnants of the NIRA survived (as components of other legislation). At best, the authors argue, the NIRA did little to improve economic conditions. Declared unconstitutional by the Supreme Court in 1936, the AAA was reconfigured and the policies and politics created by the AAA continue to influence U.S. agricultural policy and politics today. With caveats, the authors argue that the AAA improved conditions for farmers.

Finegold and Skocpol contend that the two programs were created out of very different political, coalitional, and institutional circumstances; these different circumstances explain the ultimate failure and success of the respective programs. More specifically, Roosevelt supported the NRA because it provided him with a preferable alternative to other proposals–e.g., Sen. Hugo Black’s thirty-hour work week–and because it, seemingly, could help Roosevelt maintain the support of both business and labor. Unfortunately for the NRA, the national government lacked the institutional capacity necessary to achieve its mandate. There was no existing body of experts, data, and administrative infrastructure from which the NRA could draw. In this vacuum, the NRA delegated authority to individual business executives who used it to advantage their own firms. In turn this helped spur support for a growing labor movement that was already aided by NIRA provisions and an increasing number of pro-labor, urban-ethnic Democrats in Congress. By his re-election in 1936, the NRA was dead and Roosevelt’s support from business had withered.

As with NIRA, the Agriculture Adjustment Act had key policy competition. In this case, the price supports of hardy perennial McNary-Haugen enjoyed favor within much of the agriculture community. Though the AAA would contain components of McNary-Haugen, at its core was the experiment of production controls supported by Roosevelt. Unlike NIRA, Roosevelt did not have to balance the political interests of production with those of labor. Then, as now, hired agricultural labor was unorganized and politically hapless. Thus, according to the authors, where the NRA wrecked Roosevelt’s production/labor coalition and ultimately benefited labor, the AAA began and continued as a benefit to production.

Where the NRA lacked the state capacity for success the AAA enjoyed key advantages. First, the nation’s land grant college system harbored a collective of agriculture policy experts who could and did provide the new agency with the knowledge base necessary to implement a complicated program. Second, unlike the independent NRA, the AAA was embedded into an existing bureaucracy–the U.S.D.A.–that provided administrative infrastructure as well as crucial data on commodity production, etc. Finally, the existing web of extension agents provided the means to both carry production control to the farms and monitor progress.

State and Party in America’s New Deal is divided into two parts. The first includes discussions of the authors’ state and party theoretical approach followed by the programs’ origins, implementation, and consequences. In many ways the most interesting part, at least for this political scientist, is part two. Here Finegold and Skocpol compare their party and state explanation with the competing explanations provided by pluralism, elite theory, Marxism, and rational-choice-based institutionalism. This is the type of careful theoretical evaluation missing in much, if not most, case studies. Indeed, this section is now high on my recommended list when I am trying to convince students to consider alternative explanations to their own findings and explanations.

Defenders of these alternative theoretical approaches will, no doubt, argue with the authors’ depictions and conclusions. Indeed, an easy retort for many would be simply that Finegold and Skocpol are–to borrow from Robert Frost–“playing tennis with the net down” by using a broad, descriptive framework to defeat more precise cause and effect approaches. This criticism might most aptly be applied by rational choice theorists.

In particular, the body of rational choice theory the authors confront seeks–virtually without exception–to understand the choices made within and about particular types of institutions, most notably legislatures (e.g., Congress) and administrative agencies. Inter-institutional rational choice theories are scarce and those that do exist, as the authors readily note, tend to be badly Congress-centric. Progress is being made on this front, and I suspect the most progress will be made with rational choice approaches that use party as an integrative mechanism across institutions.

The weakest aspect of this book, in my view, is the strangely muted role played by the president, Congress, and the courts. Each played crucial roles in both the NRA and the AAA, all appear in the author’s descriptive explanations of the two agencies, yet none appear central to the institutional component of the authors’ theoretical explanation. Roosevelt, for example, played a central role in both the NRA and AAA from start to finish and his differential actions toward the NRA and AAA almost certainly derived from institutional factors as well as the party/electoral basis stressed in the book. In addition, whatever initial misgivings agriculture producer interests had about production controls disappeared rather quickly; these production controls–and the AAA–certainly benefited from a congressional structure where agriculture policy was centered in single committees with coherent jurisdictions. The NRA did not enjoy similar advantages. Finally, the courts played a major role for both the NRA and the AAA. The possible differential impact of the courts on the two agencies goes largely unexamined.

That said, this is a terrific book. It deserves a careful reading and–even more–the application and testing of its ideas across other policies and eras.

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J. Richard Piper. Ideologies and Institutions: American Conservative and Liberal Governance Prescriptions Since 1933. Lanham, Md.: Rowman and Littlefield, 1997. ix + 451 pp. Tables, notes, bibliography, and index. $74.00 (cloth), ISBN 0-8476-8458-X; $27.95 (paper), ISBN 0-8476-8459-8.

Reviewed for H-Pol by Patrick D. Reagan , Tennessee Technological University

Political History Redivivus

Over the last fifteen years, scholars in political science, historical sociology, and a slowly reviving political history have called for renewed attention to the role of the state, political parties, ideology, and institutions in different societies.[1] Yet an inherent tension between the synchronic snapshot of the social scientist and the diachronic tapestry of the historian has oftentimes hindered this rebirth of interest in the state side of the state and society nexus. While the social scientist looks to test a hypothesis or build a model, the historian usually looks for the particulars to explain the context and changes over time. The two approaches do not always work in concert. In this ambitious, but repetitious work, University of Tampa political scientist J. Richard Piper attempts to synthesize the last generation of work by the new institutionalists in order to understand the changing relationship between political ideologies and state institutions over time. This thoroughly researched, unevenly written account might be taken as a good example of the renaissance of political history that traces the changes in liberal and conservative ideologies, policies, and governmental institutions between the emergence of New Deal liberalism after 1933 and the fragmentation of Reagan conservatism by 1993. The implicit assumption behind Piper’s approach is that there has been an ongoing ideological debate between liberals and conservatives vying for capture of the presidency, control of Congress, activist use of the federal court system, and maneuvering through the institutions in a system that Theodore Lowi has called “interest-group liberalism.”[2] Piper seeks to test two major theses. Have liberal and conservative coalitions used ideological values and prescriptions to create theories of governance, to propose principled policies, to use institutions to implement programs, and to rely on established and new institutional power bases to reflect those assumptions? Second, have ideologically based recommendations by liberals and conservatives had real consequences (even if unintended ones) on government institutions and operations? Moving beyond a traditional focus on the presidential synthesis, Piper identifies five areas for study including constitutional interpretation, the administrative state, federalism, presidential-congressional relations, and the role of the judiciary to test these two hypotheses.

Rather than providing a synchronic methodology aimed at confirming a social science theory or model, Piper recognizes the value of longitudinal historical study as the best way of making sense of continuity and change over time. In four parts, each dealing with a specific time period, he tracks changes in values and programmatic policies, power bases, theories of governance, and the instrumental origins and impact of theories of governance. During the 1933-1945 period, the New Deal system of interest-group liberalism emerged based on a flexible interpretation of the Constitution, expansion of the administrative state, coexistence with a federalist polity, presidential leadership of a strong executive branch and a weak Congress, and a bifurcated attitude of judicial activism in socioeconomic matters and judicial restraint in civil liberties. In the following period of 1945-1966, liberal Democratic presidents and Eisenhower via Modern Republicanism consolidated this liberal ideology which culminated in the revival of domestic reform and an ongoing activist Cold War foreign policy under Kennedy and Johnson. Yet already by the mid-1960s, Piper argues, this liberal-dominated ideology based in the presidency and Democratic interest groups was being challenged by conservatives in Congress and the postwar emergence of new conservative intellectuals, journals, and think tanks that modified and revived the old right ideology. In a period of flux from 1966 to 1981, conservatives–bolstered by the addition of former New Dealers turned neoconservatives, the New Right, and the religious right–articulated their ideology based in part on the old right’s values of an immutable Constitution, resistance to the administrative state, a highly decentralized federal system, a conservative coalition in Congress to check the power of the New Deal presidency and state, and a conservative judicial activism that between 1890 and 1937 had forestalled the development of the welfare state. By the 1981-1993 period, conservative ideology had replaced liberalism as the regnant set of values, policies, programs, and power bases. Post-Goldwater conservatism under Ronald Reagan became possible due to the fusion of traditional and libertarian ideas, newfound religious faith, corporate financing, trust in a charismatic president, distrust of liberals in Congress, and market-oriented policies in the guise of privatizing reforms. Conservatism had become the new ruling ideology, in rhetoric, if not always in practice.

In twenty-one chapters packed with factual narrative and thought-provoking insights, Piper walks the reader through post-1933 American political history. Each of the four major parts includes chapters on values and policies, liberal and conservative power bases, the liberal theory of governance, the conservative theory of governance, and the complex interplay of politics as ideology, power bases, and what can be done. Piper’s footnotes read like a running historiography of the new political history drawing not only on such well known interpretations by Samuel Lubell, Arthur M. Schlesinger, Jr., and James MacGregor Burns, but also the more recent, broadened political history of Walter Dean Burnham, Alonzo Hamby, Steven M. Gillon, Barry Karl, William Leuchtenburg, Allan J. Matusow, Kim McQuaid, and Nicol C. Rae. Significantly, he also makes good use of wide reading on the history of modern American conservatism as found in key works by Gary Dean Best, Sidney Blumenthal, Sara Diamond, Paul Gottfried and Thomas Fleming, Jerome L. Himmelstein, Sidney Milkis, George H. Nash, James Patterson, A. James Reichley, Peter Steinfels, James L. Sundquist, and George Wolfskill. Readers of H-Pol could develop a useful bibliography of the new political history while familiarizing themselves with some of the best work among political scientists using the new institutional approach just by combing through Piper’s notes and bibliography. Use of conservative and liberal commentators’ articles and books as the narrative converges toward the present shows the tremendous amount of research in secondary and published primary sources that the author has done for this work.

Much of what Piper has to say is worth reading and thinking about, but there are serious flaws in organization and style. Piper could have combined alternating chapters on liberal and conservative ideology in each of the four chronological parts for a more focused, comparative, and analytically useful work that would have benefited from some careful editing. The writing style throughout leaves much to be desired. After reading the parts on 1933-1945 and 1945-1966, this reader is tired of the repeated use of terminology that begs for definition, explication, and analysis that never comes. In the conclusion, Piper suggests that his research indicates considerable continuity over time on the ideological position of liberals and conservatives regarding constitutional interpretation, a federalist polity, and the positive role of the administrative state while attitudes about presidential-congressional relations and judicial interpretation changed dramatically. He leaves the reader wondering if more state-level case studies might clarify how once conservative, rural-dominated state governments came to become the “laboratories of democracy” heralded by the New Democrats of the 1990s. Finally, he suggests that future research might take up historical comparisons, using Leonard D. White’s classic studies as a takeoff point to consider how Jeffersonian/Hamiltonian and Progressive/New Deal ideological prescriptions may have been earlier examples of this ongoing debate, while crossnational studies inspired by the example of Samuel Beer’s work on Great Britain may have a “range of interesting and fruitful possibilities…even wider than in American history” (p. 404). Toward the end of this interesting work, Piper leaves the reader with a troubling comment that has implications worth discussing further in such venues as H-Pol: As the United States nears the dawn of a new millennium, the conservative and liberal coalitions that have battled each other during the major part of the twentieth century are fragmented and more than a little exhausted by their struggles. Liberalism in particular has shown signs of possibly terminal illness since the late 1960s, and the end of the Cold War has recently removed a major source of unity in an increasingly divided conservative coalition. (p. 391)

Perhaps the most valuable attributes of this work include its broad historical scope, a large research base of secondary accounts by scholars as well as political memoirs and journal commentaries by participants and contemporary observers, and nine tables summarizing congressional roll call analyses to determine ideological divisions in Congress and how they changed over time. Piper’s inclusion of liberal and conservative “wordsmiths” writing in The New Republic, The Nation, The National Review, Commentary, Modern Age, The Public Interest and some newspapers suggests that his implicit assumption about the value and consequence of political ideas goes beyond the heavy number crunching statistical models of post-World War II American behavioral political science. In this account, liberalism and conservatism are not presented as simplistic caricatures but rather as serious, complicated ideologies involving debates not only between liberals and conservatives but also among diverse proponents within each camp. Piper appreciates the irony of unintended consequences over time as well. By the 1980s, Reagan and Bush conservatives came to favor strong presidential leadership, an activist anti-Communist foreign policy, and executive branch use of the administrative state and judicial appointments for their own conservative ideological ends. During the same period, neo-liberals learned to appreciate and use congressional power, a principled foreign policy, increasingly professionalized state governments, and judicial review to stay in the debate. The parties of Herbert Hoover and Franklin Roosevelt had come a long way in just sixty years according to Piper. A reading of this sophisticated work suggests that political and neo-institutional history truly has been revived under the leadership of a new generation of political scientists and historical sociologists such as Theda Skocpol, while historians are only beginning to catch up.

Notes:

[1]. Key works in the new institutionalism include Bringing the State Back In, eds. Peter B. Evans, Dietrich Rueschemeyer, and Theda Skocpol (Cambridge, Eng., 1985); William E. Leuchtenburg, “The Pertinence of Political History: Reflections on the Significance of the State in America,” Journal of American History 73 (December 1986): 585-600; Gabriel A. Almond, “The Return to the State,” American Political Science Review 82 (September 1988): 853-874; Alan Brinkley, “The New Deal and the Idea of the State,” in The Rise and Fall of the New Deal Order, 1930-1980, eds. Steve Fraser and Gary Gerstle (Princeton, 1989), pp. 85-121; David Brian Robertson, “The Return to History and the New Institutionalism in American Political Science,” Social Science History 17 (1993): 1-36.

[2]. Theodore J. Lowi, The End of Liberalism: The Second Republic of the United States (New York, 1969, 1979).

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Charles F. Sabel and Jonathan Zeitlin, eds., World of Possibilities: Flexibility and Mass Production in Western Industrialization. New York: Cambridge University Press, 1997. x + 510 pp., $80.00 (cloth), ISBN: 0-521-49555-5.

Reviewed for EH.NET by James A. Jaffe, Department of History, University of Wisconsin-Whitewater.

The essays gathered in this collection build upon the ideas presented more than a decade ago in Charles Sabel and Jonathan Zeitlin’s influential article “Historical Alternatives to Mass Production” (Past & Present, No. 108, August 1985, pp. 133-76). Indeed the arguments laid out then bear so significantly upon this collection that some recapitulation is in order. Based in large part on Sabel and Michael Piore’s earlier work, that 1985 essay emphasized the persistence of small firms in “advanced” industrial societies as well as the economic success of “flexible” firms using multi-purpose machines and skilled labor to make specialized products for niche markets. Moreover, Sabel and Zeitlin expanded upon those observations and launched a broader attack on some of the more fundamental tenets of the economic historiography of industrialization. Foremost among their objectives was to reconsider the received wisdom elaborated by such prominent authors as David Landes and Alfred Chandler who, it was argued, privileged the role played by mass production in the development of the modern industrial economies. The explanatory power of the mass production model of industrialization, Sabel and Zeitlin wrote at the time, was weakened by a number of historical inconsistencies, including the obvious persistence of small firms using batch-production techniques. They also questioned the dominant assumption that self-interest and economic rationality ultimately determined economic decision-making and industrial development rather than political institutions or cultural predispositions. Indeed the mass production factory-based model, Sabel and Zeitlin concluded, was “merely a restatement of what happened, not the summary expression of an inevitable logic of interest and efficiency.”

In contrast to what they perceived to be an overly-deterministic model, Sabel and Zeitlin repeatedly emphasized a “many-worlds history of industrialization” that shifted attention toward a more protean approach to technological development, an approach based principally upon the recognition that a “craft alternative” continued to thrive in “industrial districts.” These districts developed a self-reinforcing dynamic. In them, small firms used highly skilled labor and adopted new technology; they were as likely to cooperate as they were to compete; and they successfully produced a wide range of products for a variety of differentiated markets. Moreover, these districts constructed an alternative community of sentiments in which children brought up to a trade acquired a set of tacit rules governing their conduct. These rules promoted forms of “fair” competition at the same time that they attached moral sanctions to destructive economic behavior. Therefore, these districts tended to be characterized by hitherto unrecognized forms of collaboration both between employers and employees and among the small firms themselves.

Such a wide-ranging thesis did not go unchallenged, of course. The flexible specialization model in general drew criticism from those who argued that it did not adequately characterize the nature of mass production, that it misrepresented the effects of small-scale specialization on labor, and that it replaced one set of teleological assumptions with another.

Generally, the essays presented in this collection do not attempt to directly respond to these criticisms. Instead they seek to amplify and elaborate the historical and institutional contexts within which the “craft alternative” was tried and tested. Moreover, the articles are discursively located within Sabel and Zeitlin’s alternative reading of the history of western economic development that was also briefly suggested in their original article. At that time, Sabel and Zeitlin had offered a “reconceptualization” of the industrialization process that emphasized the fact that the history of mechanization was not necessarily the history of throughput. They proposed instead a tripartite historical schema and it is roughly this periodization that informs this collection. Thus the first essays in this collection focus on why and how some regional ancient regime industries adapted and survived through the means of flexible specialization to changing markets and competition; a middle group of essays, roughly covering the late nineteenth and early twentieth centuries, illustrates the struggles that took place in several sectors between models of mass production and those of flexible specialization; and a final group emphasizes the contemporary success of several flexibly-specialized industrial sectors.

The essays on late eighteenth and early nineteenth-century manufacturing constitute some of the most compelling case studies in the book as well as nearly one-half of its bulk. Taken together they investigate not only the adaptability of several trades to both changing markets and technology, but perhaps more significantly emphasize the social, political, and institutional foundations for their relative success. The exceptionally interesting essays by Alain Cottereau and Beatrice Veyrassat adopt comparative approaches that highlight the sources of the flexible specialization’s competitive advantage over mass production techniques. Under conditions of what Cottereau has called “collective manufacture,” (p. 82) institutional practices and social relations developed that both shared risks and tamed competition among both domestic workers and manufacturers. One such institution, whose essential importance remains largely understudied, was the mutually-respected price-list (“tarif” in France and “Preisverzeichnisse” in Germany), but there were others including the important regulatory functions performed by the Conseil de Prud’hommes in France or more local organizations such as the Societe d’emulation patriotique in the Swiss canton of Neuchatel. These institutions, it is argued, reflect a corporate or collective response to competitive pressures that ensured the viability of craft production and facilitated a flexible approach to production through negotiation rather than conflict. Moreover, their survival apparently contradicts the so-called “British model of industrialization” not only in terms of the advent and introduction of mechanization, but also in terms of its assumed structural supports of private property, free trade, and “cynical individualism” (p. 107). These arguments, it should be added, are extended in different ways in the contributions of Carlo Poni on Lyons silk merchants and Rudolf Boch on the Solingen cutlery trades. When taken together, these essays may serve not only to draw attention to the distance that separated the ideological thrust of the British model, or more accurately the Lancashire cotton-spinning model, from contemporary practice but also to stimulate further research into that model’s own historical viability.

The second set of essays, on the conflict between mass production and flexibly-specialized systems, elaborates the ways in which individual sectors responded to both the threat and temptation of de-skilling, the adoption of single-purpose machinery, and the cultivation of mass markets. The contributions here, including those by Alain Dewerpe on the Italian engineering firm Ansaldo, Zeitlin on British engineering, and Peer Hull Kristensen and Sabel on Danish dairy cooperatives, are highlighted by Philip Scranton’s sparkling essay on American textile manufacturing. Rather than succumb to the idea that there is an “immanent logic to historical change,” (p. 342) Scranton emphasizes the “situational particularities” (ibid.) that characterized different sectors of the trade and which led some branches to adopt mass production and others batch production techniques. Not only does Scranton outline the comparative risks and advantages to both bulk and batch production, he also attempts to establish the fact that different branches of the industry exhibited relatively coherent “clusterings of decisions” (p. 313) on a wide variety of issues including finance, marketing, management, and labor relations. Such attempts to delineate a spectrum of industrial possibilities are similarly characteristic of Zeitlin’s contribution, which argues that British engineering firms “selectively adapted” to mass production techniques giving rise to hybrid forms, and Dewerpe’s interesting case study of the ways in which the same firm adopted both craft and mass production methods under different market and political conditions.

The final group of essays emphasizes three regional success stories of flexible specialization: Vittorio Capecchi on the Bologna packaging industry, Jean Saglio on the transition from comb-making to the plastics industry in Oyonnax, France, and Hakon With Andersen on Norwegian shipping, brokerage, and insurance. They share as well an emphasis on the importance of social and institutional linkages that served to share information, encourage collaboration, and reduce risks. In the case of Bologna, Capecchi argues that the Bolognese packaging industry developed first as an “industrial subsystem” (p. 393) of engineering through the creation of a multitude of new firms from one “mother” firm, relying on both indigenous skills and local university talent. For Norway, Andersen discusses the creation of links between many small “frontline” shipping and shipbuilding firms and “supporting” groups, such as brokers and insurers. Through the creation of a complex of marketing and sales organizations, certification and classification organizations, shipbuilders’ associations, collaborative research projects, and the like, small Norwegian shipping firms from the north-west were able to compete with large-scale integrated firms by sharing information. Finally, Saglio’s essay is most notable for its innovative attempt to understand the situational rationality of local actors as they comprehend the ways in which their trade and local society functions as well as their own place in the scheme of things.

These essays, therefore, are a welcome contribution to the historical debate that began with the publication of Sabel and Zeitlin’s article in 1985. They attempt to extend our knowledge in several critical areas as well as offer a nuanced approach to the way in which the industrialization process needs to be understood. Naturally, in a project of this scope some discordant elements creep in. For example, there seems to be a relatively weak consensus on the precise nature of mass production, many authors preferring to adopt alternative terms such as “serial production,” “routinization,” or “standardized production.” Similarly, the fundamental dynamism of the “industrial district” is replaced at times with alternative classificatory schemes such as the “industrial subsystem” or the “collective manufacture.” Finally, the editors themselves, in a relatively brief introduction, appear to be pushing the argument in newer directions, towards the understanding of economic history both as a postmodern narrative project and as a rule-making process. Such arguments may not immediately resonate among economic historians, and indeed deserve to be pushed further, but they may very well help to refashion the questions they ask.

James A. Jaffe Department of History University of Wisconsin-Whitewater

James Jaffe is author of The Struggle for Market Power: Industrial Relations in the British Coal Industry (Cambridge, 1991) and the forthcoming Asymmetries: Work and Labor Relations during the Industrial Revolution.

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EH-NET BOOK REVIEW

Published by H-Business@eh.net (March, 1998)

Garth L. Mangum and R. Scott McNabb. The Rise, Fall, and Replacement of Industrywide Bargaining in the Basic Steel Industry. Labor and Human Resources Series. New York: M. E. Sharpe, 1997. xvii + 209 pp. Tables, figures, notes, bibliography, and index. $62.95 (cloth), ISBN 1-56324-982-0; $21.95 (paper), ISBN 1-56324-983-9.

Reviewed for H-Business by Howard Stanger , Buffalo State College

Economists Garth Mangum and R. Scott McNabb have written a very good overview of collective bargaining in basic steel since the historic 1937 agreement between the leader of the industry’s oligopoly–U.S. Steel–and the Steel Workers’ Organizing Committee (SWOC), later the United Steelworkers of America (USWA). Their emphasis is on the interaction of both product and labor markets on collective bargaining structure and outcomes (most notably wages), benefits and industry viability. They also pay careful attention to managerial choices pertaining to technology and labor relations.

Since the birth of the U.S. Steel Company in 1901, oligopoly defined the structure of the American basic steel industry. But unlike most oligopolies, steel was characterized by product and technological homogeneity and regional fragmentation. The relevant labor market required identical skills in each mill, little labor pool competition as a result of geographic separation in the product market, and formal internal labor market structures offering workers a high degree of job security and long-term attachment. Given the cyclical nature of the industry, layoffs occurred periodically. This structure enabled the USWA to bargain for above-average wages. One problem was that market fragmentation had spawned wage inequities within single plants and companies and across firms and regions. The union’s drive to remedy wage inequities, along with the peculiarities of the industry, created favorable conditions for industrywide collective bargaining.

Both labor and management found this centralized form of bargaining in their best interests. According to the authors, the union had pursued industrywide bargaining in the 1950s in order to take wages out of competition, to assure that every steelworker doing the same job got the same pay throughout the industry, to put industry competition on the basis of managerial competence rather than the ability to obtain cheap help, and to ensure wage differences among firms did not force a race to the bottom. Company concerns were parallel: to assure that no competitor was able to gain the advantage of cheaper labor rates and to prevent the union from whipsawing wages upward by shutting down one firm while the others supplied the homogeneous product, then forcing the pattern one by one on the rest (p. 93).

Labor cost uniformity was not expected; in fact, the parties accepted a narrow range of wages so long as all competitors were part of the collective agreement. Within the broad parameters of economic laws, the authors discuss other factors which contributed industrywide bargaining. For example, between 1942 and 1947, the steelworkers and a number of large firms jointly established the Cooperative Wage Study (CWS) which, through extensive job evaluation, sought to remove wage inequities in northern states. By 1954, with the eradication of the southern wage differential, “the steel industry had virtually a single wage scale for almost all of the steelmaking operations under contract with the USWA, irrespective of size, relative profitability, or geographical location. Given an industrywide wage structure and job evaluation format, it then requires no great intellectual leap to see that formalization of industrywide collective bargaining was the next logical step” (p. 40).

Other factors had to fall in to place, however. In 1955, the USWA announced that union president David J. McDonald would head all negotiation committees to ensure contract uniformity. Second, in 1956, management and labor respectively, created the Coordinated Committee Steel Companies (CCSC) and the USWA’s Basic Steel Industry Conference (BSIC) to conduct negotiations. Finally, federal government gave its imprimatur to industrywide bargaining during World War II and the Korean conflict. In 1956, industrywide bargaining was officially born.

During the 1959 negotiations, the first industrywide bargaining round, a 116-day strike occurred, which, according to the authors, planted the “seeds of dissolution” of the bargaining structure. During this time, steel imports became a competitive concern for steel management. Exacerbating the industry’s woes was management’s hesitance–based upon inaccurate industry forecasts– to modernize facilities. When they did invest, they implemented quickly outmoded processes. These missteps created opportunities for foreign steel firms and, by the 1970s, leaner nonunion minimills. The results were devastating: falling industry profit rates, the shuttering of obsolete plants, divestment out of steel, and zero net investment between 1955 and 1980. The book’s institutional and economic framework prevents a discussion of the human and social costs of dislocation which, in this reviewer’s opinion, is an important consequence of bargaining and a serious omission.

To deal with frequent strikes in the post war period which forced steel users to seek other suppliers, primarily foreign producers, the parties established the Experimental Negotiations Agreement (ENA) in 1973. In exchange for lucrative compensation gains, the USWA gave up its right to strike. This potential solution to the industry’s plight was nullified by the inflationary economy of the 1970s, which made the ENA a very costly pact as compensation costs drastically cut into firm profits. In 1980, reeling from the ENA’s deleterious effects, the CCSC unilaterally ended it and girded itself for the 1983 round of negotiations which began early in 1982.

The 1983 agreement was the first concessionary contract for the USWA. Contemporaneously, the union experienced a change of leadership with the untimely death of Lloyd McBride and the ascendancy of the visionary Lynn Williams. With the industry and the union in flux, the oligopolistic wage structure and industrywide bargaining were vulnerable. By 1985, the CCSC abandoned industrywide bargaining after some firms withdrew immediately after the 1983 round. Diminishing “commonality of interests” based upon different financial positions was a major reason for its demise. The authors argue that developments affecting both product markets and technology between 1986 and 1995 rendered industrywide bargaining as obsolete as the many plants that closed in the preceding decades. However, the industry outlook became much brighter. American firms were now more competitive in international markets, with many engaging in joint ventures with foreign concerns to speed up modernization, raise productivity, and ensure survival. With help from union wage, benefit and work-rule concessions during the 1983 and 1986 rounds, output per employee rose a phenomenal 40 percent between 1986 and 1993. Profits also turned up.

The search for a new bargaining structure began in 1986 with the return of single company agreements. The authors go into detail regarding individual contract settlements in this and subsequent rounds of negotiations. By the 1990 round, wage and benefit cuts had been restored. One major difference between this era of single company pacts was the end of U. S. Steel’s leadership. With its corporate name changed to USX to reflect its diversification strategy into oil and gas, U. S. Steel was no longer the chief labor policymaker and lead agreement. The bitter six-month strike there in 1986 created an even stronger adversarial labor relationship, just as anachronistic as industrywide bargaining. This would become meaningful during the 1993-94 round, when the USWA unveiled its “New Directions” strategy of labor-management cooperation. It is in this area that the authors make new contributions to the literature on steel labor relations. Promoted by Lynn Williams, New Directions has at its core two key principles: 1) that no group has a greater stake in a company than employees, and 2) the best path to ensure business success was to involve employees in business decisions. For its part, the union “would agree to long-term contracts, some relaxation of restrictive work rules, and cooperation in reducing steel company workforces, as long as that was accomplished by attrition. In return, the union would require a high degree of job security for its membership, adequate funding arrangements for the company’s ‘legacy costs, and a greater say in how the steel companies were run” (p. 134). Inland Steel was the first to agree to this approach when it signed a six-year deal. The union won decision-making authority at all levels of the company. By the end of the round, all major firms signed similar deals, with slight firm-specific deviations, including the level of union involvement. Overall, a general pattern re-emerged. Mangum and McNabb explore New Directions and other innovations such as the jointly-established, industrywide Career Development Program (1989) through a handful of interviews and McNabb’s personal experience as a program counselor at the Institute for Career Development in Indiana. While the generalizability of a very limited number of persons interviewed can be questioned, the are careful not to draw firm conclusions. Progress at certain facilities of National Steel and Bethlehem Steel has been offset by initial failures at certain U.S. Steel and LTV plants. The authors are correct to note that high trust relationships and commitment are necessary to make innovative workplace programs succeed. The reverse also holds. They also contend that the USWA’s new program could have only come about by a “thoroughly chastened management–and only in the absence of the dominant industry leadership that had prevailed prior to 1985” (p. 169).

At present, even with basic steel doing quite well for a mature industry, the future of labor relations and bargaining structure are indeterminate. Still, the authors return to their conviction that there is a strong link between product and labor markets. They argue that New Directions tightens this link: “Instead of merely reacting to the product market within labor-market negotiations, the New Directions model, when fully utilized, would have the union participating as a partner in product-market decisions that affect the entire industry” (p. 192).

Mangum and McNabb do a nice job of reviewing the literature on the history of collective bargaining in the steel industry from institutional and economic perspectives. They also provide their audience with a heavy dose of industry economics–perhaps too much in places. The book is loaded with easy-to-read tables of relevant industry and employment cost data. For a single source, written in a straight-forward manner, this book has a lot to offer. However, it is not without some weaknesses. First, steel bargaining relations are rarely compared with other industries, particularly as it pertains to changes in the bargaining structure. The breakup of centralized bargaining structures has been going on in a number of industries since the 1970s. Industrial relations scholars have been examining the decentralization of bargaining in the United States and Europe. This growing literature was omitted by the authors. Second, the authors missed an opportunity to provide a theoretical or conceptual framework on the antecedents and consequences of bargaining structures. Here the literature is not as rich, but could still be useful for comparison. Finally, there is no discussion on the implications of decentralized bargaining on bargaining power and outcomes. In general, unions are disadvantaged by decentralized bargaining, although it can be argued whether the bargaining structure is either a cause or consequence of union weakness.

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Christopher Sellers, Hazards of the Job: From Industrial Disease to Environmental Health Science. Chapel Hill: University of North Carolina Press, 1997. 331 pp. $45.00 (cloth), ISBN 0-8078-2314-7.

Reviewed for EH.NET by Mark Aldrich, Department of Economics, Smith College.

This is a complex, thoughtful, and meticulously researched history of thought about occupational disease in the first half of this century that is based upon a wide reading of the archival, primary printed, and secondary literature. Although not an economic history, the work will interest economists and anyone else anyone concerned with the evolution of the American workplace during these years.

Sellers begins with a prologue informing us that he intends to recover “this biological dimension to the workplace’s past” (4), and then goes on to ground postwar environmentalism in the earlier industrial hygiene movement. There follows a chapter on the discovery of lead and other industrial poisoning in Europe and its comparative neglect in the United States until the early years of this century. Sellers occasionally provides glimpses of how nineteenth century labor markets dealt with well-known toxins – fewer than 15 percent of workers at one lead-using firm stayed more than forty-eight weeks, and the foreman would encourage those showing poisoning symptoms to leave. Managers, he argues, were largely unaware of the extent of such disease – a rational result, perhaps, of the low payoff to such information. Two chapters then trace the rising concern with occupational health to the rise of militant labor and to legal changes such as Holden vs Hardy- which seems implausible as states had been regulating health and safety for decades. The industrial hygiene movement begins with the revelations of phosphorous and lead poisoning by the American Association for Labor Legislation and Alice Hamilton, and the more formal investigations by the Public Health Service (PHS). Themes include the development and meaning of expertise and the ability of researchers such as Hamilton to wield “disciplinary power” to encourage business compliance with researchers’ prescriptions.

Chapters four and five continue these themes, tracing the complex relations between scientists and the business community, the problems with identifying occupational diseases, and the origins of a laboratory-based study of occupational disease at such institutions as Harvard’s School of Public Health. Here again Sellers argues that while company concerns often shaped research agendas and publications, researchers were still able to exploit the need of corporations for disinterested expertise to carve out both independence and disciplinary power. Chapter six briefly discusses some of the occupational health studies of the 1930s and notes the increasing interest in toxicology of large companies such as DuPont and GM but says little on what stimulated this interest or what results it had. In the remainder of that chapter, the focus turns to the non-work environment. Sellers recounts a PHS study of environmental lead exposures to apple workers and consumers that revealed the difficulties of applying outside the workplace those techniques that relied on clinical findings of disease. The conclusion links modern environmentalism to the earlier hygiene studies. The author claims that the modern overemphasis on synthetic industrial chemicals is a legacy of the industrial hygiene movement, and he unfavorably contrasts EPA-OSHA regulation with the earlier, more flexible approach, which he compares to right-to-know laws.

I want to raise two issues that relate to coverage and evidence. This is a history of the development of scientific thought about occupational disease. It is not, as the title suggests, a history of hazards of the job if by that is meant a reasonably comprehensive assessment of the extent of industrial disease, nor, as the author makes clear in the preface, is it a comprehensive history of industrial hygiene. This emphasis on scientific thought means we learn much less about business and labor leaders’ motives than about those of scientists. Similarly, the coverage of hazards and regulatory efforts is spotty – there is little on silicosis, byssinosis, black lung, and asbestos-related disease, perhaps because their study did little to advance the science of occupational medicine. The increasing coverage of occupational disease by workers’ compensation laws is noted but not discussed in any depth. Nor do we come away with any sense of what worked: Sellers informs us that in 1910-1911 Illinois tightened regulations on lead, arsenic, and brass industries, but the book does not discuss whether or not the new rules had any effect.

No one should be criticized for failing to write a different book, and the above is not intended as criticism, but merely to clarify the book’s scope. But one aspect of coverage does affect the author’s argument. Of the broad themes Sellers advances, perhaps the most interesting to economists is the power he ascribes to informal, expert-based authority in shaping employer behavior. Early company efforts to reduce lead exposures were probably not cost-effective, Sellers argues, but were done for moral reasons or public relations, and he claims that “for [Alice] Hamilton, the investigative enterprise became a regulatory act” (73). Later he asserts the “surprising effectiveness of this new professional form of authority”, and claims that it “exerted a new discipline over a growing number of employers” (180). Yet three pages later we are told “preventive measures [urged by Harvard’s School of Public Health] had little impact on industrial processes.” (183). In fact the evidence on these issues is exceedingly weak. Thus, there is little about the prevalence of even such a well-studied disease as lead poisoning, or about whether occupational diseases were reduced by the industrial hygienists’ efforts. Occasionally there are generalizations about the extent of occupational disease such as “Barnes shared this kind of dilemma [the need to accept an unhealthy job during the Depression] with tens if not hundreds of thousands of others” (189). But the source for this claim turns out to be four letters written by workers, two of which date from the 1940s.

While it is easy to nit-pick any book, there are number of places in addition to the above where the author’s interpretation outruns his evidence. Occasionally causation is either obliquely asserted or presented without much evidence. For example, Sellers asserts (133) that “By raising his wariness of patient testimony to such an extreme, Schereschewsky forestalled the employer and professional criticisms endured by Hamilton: no one could accuse him of falling prey to garment workers’ exaggeration of their ills.” It is not clear whether this is simply a statement of behavior or an attempt to imply motive as well. Or consider the following problematic attempt to infer motive. Apparently the author found few photographs of physicians with workers and so a picture of a doctor reading physical examinations is captioned “Hardly ever did industrial hygiene researchers allow themselves [my emphasis] to be photographed with worker subjects; they preferred to be seen at their desks, with emblems of their science . . ..” Of course the absence of photographs reveals nothing about the cause of that absence.

Finally, although it may seem inappropriate for an economist to comment on anyone else’s prose, Sellers’ book is not an easy read. There are too many sentences such as: “To tell this tale is thus to foreground the centrality and importance to twentieth-century workplace history of knowledge claims themselves – in this case, the conflicting representations of environmental biology” (p. 8). Or consider this assessment of middle-class reformers: “We may understand their discipline as a major symbolic achievement: like the Protestant ethic whose Weberian reading Jean-Christophe Agnew has lately recast, ‘not simply an economic strategy’ for controlling both workers and employers, but a ‘cultural strategy for ordering a mass of meanings’ incited by market-driven workplace change” (p. 230).

Despite such difficulties this remains a valuable book. It reveals a role for science in shaping production technologies that economists have largely overlooked and a linkage between industrial hygiene and environmentalism that has gone largely unnoticed. It will be the definitive treatment of the early evolution of industrial medicine and an invaluable source on the origins of health and safety regulation.

Mark Aldrich Department of Economics Smith College

Mark Aldrich is author of Safety First: Technology, Labor, and Business in the Building of American Work Safety, 1870-1939 (Johns Hopkins University Press, 1997).

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Sanford M. Jacoby. Modern Manors: Welfare Capitalism Since the New Deal. Princeton: Princeton University Press, 1997. xii + 345 pp. Notes and index. $35.00 (cloth), ISBN 0-691-01570-8.

Reviewed for H-Business by Edward Berkowitz , George Washington University

Welfare capitalism represents one of those marginal academic side-shows that nonetheless has surprising staying power. At various times historians have shown interest in ways that firms have distinguished themselves by being model employers. The heads of these firms, unlike their stereotypical colleagues, do not believe in the classical theory of labor supply in which workers present themselves in an infinite supply at the market price. Instead, they understand that workers are valuable commodities who become even more valuable once they receive some form of on- the-job training. Hence, these employers, either out of a sense of paternalistic benevolence or, more likely, a dollars-and-cents understanding of the labor market, have tried to reduce turnover by linking pay to the company’s productivity and by improving the conditions of work beyond those of their competitors. In the conventional historiography, the hey-day of this form of welfare capitalism comes in the 1920s, when businessmen held a sort of moral sway over the nation.

Then, in the 1930s, welfare capitalism breaks down in the face of the collapse of the labor market that we call the depression. As the price of labor falls and the demand for products declines, benevolence no longer pays substantial dividends. Government steps in to offer a sort of alternative form of welfare capitalism. Through legislation the government mandates that workers have the right to bargain through representatives of their own choosing and workers also have the right to pensions and unemployment compensation that are supplied by the government, rather than the company. Historians have argued about the role of welfare capitalists or corporate liberals in the creation of the twin peaks of New Deal regulation: the Wagner Act and the Social Security Act. Whatever the results of this argument, the outcome remains the same. In the 1930s, the torch gets passed from welfare capitalism to a new world in which both unions and the government, often acting in tandem, have a substantial presence. Welfare capitalism is a subject for the first third of the twentieth century and not more recent times.

Of course, that conventional view is just plain wrong. We know, for example, that there was a corporate welfare revival in the postwar era and that welfare capitalism remains alive and well today. In the latest round of health reform, for example, the Clinton administration, just like the Nixon administration before it, tried to create a plan that would mandate health insurance coverage. Clinton had no intention of having the government become the primary supplier of health care. Instead, he wanted to make sure that all employers supplied it their employees. He wanted to enforce a welfare capitalist norm, in other words.

That suggests the need for a comprehensive history of welfare capitalism since the New Deal, and, within the constraints of the evidence, Sanford Jacoby has provided it. His book is a scholarly and thoughtful look at the welfare capitalist practices of three companies in the era from the 1930s to the 1960s. His basic argument is that welfare capitalism did not die in the 1930s. To be sure, not all firms followed its course. As we know, many large nationally based industrial firms succumbed to pressures from the CIO and entered into collective bargaining agreements with unions. Jacoby’s three firms, each for its own reason, escaped from the union movement. Each developed an alternative management structure that bound employees to the company.

In the case of Kodak, executives could build on the paternalist traditions of George Eastman who, for example, offered periodic bonuses to his employees. In creating welfare capitalist practices, Kodak also took advantage of its location in Rochester New York, a location that allowed it to hire ethnically homogeneous workers–plain white bread Wasps–who were perhaps less susceptible to union influences than members of other ethnic groups. Even more important, Kodak had a virtual monopoly on photographic film and suffered less from the depression than did those companies in more competitive markets where the cross elasticities of substitution (if I remember my economics right) were greater. Protected from some of the forces that gave rise to unions in other firms, Kodak invested a great deal in keeping the unions out, offering its employees profit sharing plans and a wide array of recreational programs and other amenities. Above all, Kodak worked hard to minimize lay-offs by planning ahead for the seasonal variations in the photography business and, if necessary, by moving workers from one job to another. As a result of all these practices, Kodak kept unions away and practiced an alternative form of labor relations that might be called welfare capitalism.

Sears Roebuck, the Chicago company that began as a mail order house and emerged as the nation’s largest retailer in the postwar era, produced a different style of welfare capitalism. It existed in a much more competitive product market, and it operated stores in locations from coast to coast. Like Kodak, Sears experimented with a form of profit-sharing but, unlike Kodak, Sears could not fight unions through overt means. Sears had to do business in places like Gary, Indiana or Lansing, Michigan where it probably would have been a bad practice to bad mouth unions in the late 1930s and early 1940s. As a means of controlling its work force, Sears did more than offer good wages and working conditions. It also initiated an attitude survey program which, as Jacoby notes, “became one the largest and most sophisticated applications of behavioral and social science research to personnel problems in industry” (p. 111). Sears used the data from the survey to identify sources of employee grievances and correct personnel problems. In a more manipulative sense, Sears also used the surveys to identify potential union organizers and to keep them from proselytizing other employees.

Thompson Products, the third of Jacoby’s companies, was a much more traditional industrial manufacturer. Located in Cleveland, a highly unionized, ethnically heterogeneous town, Thompson products made parts for automobiles and later for airplanes. Unlike Kodak and Sears Roebuck (whose leader in its early days was Julius Rosenwald, an important figure in Chicago and national philanthropic circles), Thompson did not have much of a welfare capitalist tradition before the New Deal. In 1933 Frederick C. Crawford took over the company and, among other things, started a personnel department and new welfare programs. His main contribution, however, was in the creation and maintenance of a series of what Jacoby describes as “semiautonomous company unions and a bevy of human relations programs” (p. 142). In Cleveland, unlike in Rochester, some semblance of a union was necessary. At Thompson Products, at least in its Cleveland plants, that union took the form of a company union that was resilient enough to withstand challenges from the United Auto Workers.

Why did Jacoby choose these three companies? I think it is because the records of these companies were available to him and, as he notes and business historians can certainly appreciate, the records of private companies, particularly the labor relations aspects of those companies, are not easy to obtain. Because of his choice, he has to strain a bit to establish these companies as ideal types of welfare capitalist employers, yet his analysis suggests that particular factors account for developments in each of the companies. It matters, for example, that Frederick Crawford took over Thompson Products, that Marion Folsom, an extraordinary welfare capitalist statesman, worked for Kodak, and that Robert E. Wood followed Julius Rosenwald as head of Sears. Other companies, no doubt, have their singular individuals and their particular factors that might have changed Jacoby’s story if he had chosen them.

Still, what is here is more than enough to establish Jacoby’s point that, by the 1950s, there was a non-union alternative in the world of industrial relations. Most of the nation’s attention was focused on labor unions and on collectively bargained wage agreements. It was an era when labor relations was still an important journalistic beat and writers like Abe Raskin of The New York Times wrote about labor relations in the auto and steel industries. A small academic cottage industry in labor relations developed, led by professors such as California’s Clark Kerr, Princeton’s Fritz Harbison and Richard Lester and Harvard’s John Dunlop. These people tended to write about unions as institutions and about the “mature” form of collective bargaining. In their spare time, many acted as arbitrators or mediators and thus took a formal role in the labor relations process. Intellectuals with a wide audience, such as John Kenneth Galbraith, viewed union-management relations as an important manifestation of American pluralism. With all the attention on unions, the commentators overlooked the robust nature of welfare capitalism. As the appeal of unions faded in the face of global competition and the general stagnation of the economy in the 1970s, welfare capitalism once more became visible. It meshed with the Japanese style of teamwork that came into vogue; it seemed to offer more flexibility than did the rule-bound style of industrial relations common to unionized workplaces. More recently, however, as the workforce has become more educated, the times seem to have once again bypassed welfare capitalism. Modern workers, particularly educated and advantaged workers, as Jacoby notes, often appear to be like nineteenth-century craftsmen. They drift from company to company, adding lines to their resumes and providing their own form of security through pensions and health insurance that they maintain on their own. As if to underscore the importance of these independent workers, the Clinton administration may soon convert the Social Security system so that part of it becomes a private savings account.

One of Jacoby’s main contributions in this very impressive book is to illustrate how modern welfare capitalists have come to grips with the Wagner Act and the Social Security Act. Executives from all three of his companies became involved in national politics. General Wood of the Sears Roebuck Company was a traditional conservative, involved in things like the America First Committee. Frederick Crawford became the head of the National Association of Manufacturers and played a key role in the modifications of the Wagner Act that led to the Taft-Hartley law. In particular, Thompson Products fought to preserve the right to appeal to its workers on behalf of its company-controlled union, despite warnings from the National Labor Relations Board that such appeals represented tampering with representation elections. Marion Folsom of Kodak became the leading business expert on social insurance and fought to preserve Social Security and unemployment compensations in forms that blended seamlessly into welfare capitalist practices. These companies, then, did not run away from the New Deal so much as they learned to adapt its regulatory structure to their purposes.

Without a doubt, this book is an important one that will be read both for the data it provides on the three companies and for its more general points about the persistence of welfare capitalism beyond the New Deal. The research is almost overwhelming as is the general degree of erudition in the book. It is, to be sure, an academic book in which the author occasionally takes excursions into trendy academic topics to the detriment of establishing a clear line of argument. Hence, there are digressions on such topics as the gender composition of the labor force during World War II, the nature of industrial psychology, and the organizing tactics of the United Auto Workers. Some of the writing is a little over-elaborate and demands close attention from the reader, as in this sentence (p. 74): “In theory, Kodak wage dividends plans should have been a factor in the company’s performance during the early 1930s, since profit sharing makes wages more sensitive to economic conditions, which, in turn, shields employment levels during hard times.” I could have used more help with the implicit economic theory in that sentence and would have preferred that it contain fewer clauses. Still, an academic monograph is an appropriate place to display one’s learning and it is clear that Sanford Jacoby has much to teach. One can predict with confidence that this book will exercise an important influence over modern American historiography; it represents an extremely impressive achievement.

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EH.NET BOOK REVIEW

Published by EH.NET (February 1998)

Bernard C. Beaudreau, Mass Production, the Stock Market Crash, and the Great Depression: The Macroeconomics of Electrification. Westport: Greenwood Press, 1996. xx + 182 pp. $59.95 (cloth), ISBN: 031329920X.

Reviewed for EH.NET by William J. Hausman, Department of Economics, College of William and Mary.

Beaudreau asserts boldly on the first page of his book that his purpose is to “provide a definitive account of the Great Depression and the events leading up to this cataclysmic event” (p. xv). At least he didn’t claim to have written “the” definitive account. In fact, this is a highly idiosyncratic treatment that explores a number of events of the ‘teens, 20s, and 30s. There is much that is outrageous, along with occasional insights that warrant further study. The fundamental argument is that productivity-enhancing structural changes in industry in the 1920s set the stage for the events that were to follow. The treatment of the period thus fits within the basic approach economic historians such as Michael Bernstein (The Great Depression: Delayed Recovery and Economic Change, 1929-1939, Cambridge University Press, 1987) and, more recently, Rick Szostak (Technological Innovation and the Great Depression, Westview Press, 1995) have taken.

The chain of logic is clearly defined but long. The electrification of industry (“the most important process innovation in this century”), because it set the process in motion, is actually the villain of the piece. The electrification of the assembly line in the 1920s (a process led by the Ford Motor Company) substantially raised productivity and led to an era of mass production. This brought conditions of “oversupply,” initially hidden by labor hoarding. Eventually, aggregate income failed to keep pace with productivity, not because profits rose substantially, but because wages failed to rise. By 1928 Senator Reed Smoot, with the support of Hoover, proposed restricting access to the U.S. market by raising tariffs. The prospect of passage of the tariff bill in 1928 set off the speculative stock market boom. The failure of the bill in the Senate the following year precipitated the stock market crash. Planned investment then was cut drastically, setting off the decline in income and the Great Depression. The National Industrial Recovery Act was the only policy response that had a chance of reversing the process, but this experiment in cooperative behavior aided by government was cut short by the Supreme Court. This is all laid out in the introduction. Twelve chapters, each of them short, then attempt to either flesh out the bare bones of the logic, or offer asides on some aspect of the historical process.

Because the chain of logic is long, it can be attacked at numerous points. Take, for example, the monocausal view of the course of the stock market. In two chapters and an appendix, Beaudreau links the prospects of the tariff bill as reported in the press to stock market activity. A correlation can be established, but the causality is obscure, relying heavily on an indirect link to planned business investment. One important aspect of the event that is not mentioned is the fact that industrial stocks actually rose much less than public utility stocks, especially stocks of public utility holding companies, a sector not much affected by the prospective tariff. In the end the correlation is not sufficient to prove the point.

The book contains some interesting chapters. In one, a game-theoretic model is used to show how an economy may get stuck in a low-growth equilibrium in the presence of a productivity-enhancing technological shock. It carries some heavy assumptions, the critical one being that firms will not raise wages in response to the shock (without some third-party intervention). It is conceivable that such a process had a role to play in bringing on the depression.

This book is not a definitive account of the events surrounding the Great Depression. The basic approach of exploring structural changes as the root cause of the depression is, however, a worthy endeavor. Perhaps if the author had been more modest in his claims, my reaction would not have been as critical.

William J. Hausman Department of Economics College of William and Mary

Will Hausman is the author of “Long-term Trends in Energy Prices,” in Julian L. Simon, ed., The State of Humanity, Oxford: Blackwell Publishers, 1995, and other papers on the history of the U.S. electric utility industry.

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